By Jason Simpkins
G. Kennedy Thompson, formerly Wachovia Corp.'s (WB) chief executive officer, can now be added to the list of high-profile subprime casualties that already includes Citigroup Inc.'s (C) Charles O. "Chuck" Prince III, The Bear Stearns Companies Inc.'s (BSC) Chief Executive Officer James E. "Jimmy" Cayne, and Merrill Lynch & Co. Inc.'s (MER) E. Stanley "Stan" O'Neal.
Thompson will step down after 32 years of service after having made a series of untimely – and ultimately disastrous – decisions that have cost the company nearly half its market value over the past year.
Shareholders began clamoring for Thompson's removal in April after the company announced its first quarterly loss in seven years and cut its dividend by 41%. Issues were compounded on May 6, when Wachovia announced a first-quarter loss of $708 million, 80% more than the bank had previously reported.
The company has marked down $5 billion in mortgage and other debt-related assets, and recently announced it would cut up to 500 jobs. Wachovia stock has plummeted about 40% year-to-date.
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Thompson's most costly decision came in 2006 – the peak of the housing boom – when he agreed to spend $25.5 billion to acquire Golden West Financial Corp. Nearly half of Golden West's lending business was based in California and Florida, which are now among the national leaders in foreclosure rates. Thompson himself acknowledged the deal as being "ill-timed."
"No single precipitating event caused the Board to reach this decision, but a series of previously disclosed disappointments and setbacks cumulatively have negatively impacted the company and its performance," Wachovia Chairman Lanty L. Smith, said in a statement.
Smith will takeover as CEO until a replacement for Thompson can be found. He will assume control over all of Wachovia's staff functions, as well as head a board committee that has been charged with finding a new CEO. Vice Chairman and General Bank President Benjamin P. Jenkins III, has been appointed interim chief operating officer.
At WaMu's annual meeting in April, shareholders voted to bounce Killinger from his post after the company posted a first-quarter loss of $1.14 billion. Independent director Stephen Frank will officially supplant Killinger July 1.
The world's top financial institutions have reported more than $386 billion in asset write-downs and credit losses related to the housing bust, according to Bloomberg News.
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